Retrospective Legislation allowed under EU law – sometimes
According to the ECJ, Governments can announce changes in law that deal with avoidance in press releases and legislate later, but with effect from the date of the press release, if it is necessary to prevent exploitation of loopholes in the period before the law changes. The case is notable as the ECJ did not follow the opinion of its Advocate-General, who had been strongly in favour of a ruling against the legality of retrospective legislation. At least in part, the ruling may have been motivated by the possibility that some Governments (notably Sweden) may have had to repay significant amounts of tax if the ECJ had found for the taxpayer.
Businesses with Belgian customers – VAT recovery opportunity?
Businesses that incur Belgian VAT on events to promote their products may be able to reclaim the tax, following a recent decision in the Belgian Supreme Court. The Court decided that costs incurred to sell or publicise products are not "entertainment costs" as the Belgian authorities (and many other tax authorities) had maintained, so VAT on them can be reclaimed.
Retailers - children’s clothing
The High Court has rejected an argument that larger sizes of children’s clothing should be VAT-free. The Tribunal had already rejected H&M Hennes appeal against a ruling that clothes for children 164 cm tall were subject to VAT and the judge agreed with the Tribunal’s view.
Retailers – Wristbands are not clothing
Wristbands made of towelling and designed to absorb perspiration are not "clothing" and so cannot be VATfree even when designed for use by children, according to the Tribunal. HMRC’s ruling that the items were "accessories" and that VAT was due on them was upheld.
Charities – increased VAT recovery on the way?
We hear that HMRC may be persuaded to treat wristbands and similar items that are given in return for donations as VAT free "sales" where the items have no intrinsic value and cost charities only a small amount. This would allow the charity to recover VAT on the purchase of such items.
Electronic VAT returns and payment
Businesses filing "eVAT" returns could delay payment of their VAT by up to 3 days if they take advantage of the direct debit arrangements now being offered by HMRC. Some businesses already benefit from the extra 5 working days allowed for them to file their returns and make their electronic payment. As long as arrangements are made in time, HMRC will collect the payments electronically by direct debit three days after the extended "due date" for a return for those eligible businesses. Please speak with your usual VAT contact for further information.
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